Articles in Category: Ferrous Metals

Vale SA is looking to sell part of its future iron ore output for Chinese cash today and the Philippines’ nickel mining crackdown has claimed its seventh victim.

Vale Brings in Chinese Investors

Brazil’s Vale SA is considering raising as much as $10 billion from the sale of up to 3% of future iron ore output to undisclosed Chinese companies, two sources with direct knowledge of the matter said.

Two-Month Trial: Metal Buying Outlook

Under terms of the deal, Vale, the world’s biggest iron ore producer, would receive streaming financing from the companies.

Philippines’ Crackdown Claims 7th Nickel Miner

The Philippine government has suspended the operations of a seventh nickel miner, Claver Mineral Development Corp., a minister said on Thursday, deepening an environmental crackdown that has caused jitters in global nickel markets.

Free Download: The July 2016 MMI Report

The Philippines is the biggest supplier of nickel ore to top market China and the suspension of some mines and the risk of more closures sent global nickel prices to an 11-month high of $10,900 a metric ton on July 21.

The boost that the Automotive MMI recently felt from platinum and palladium continues as automotive catalyst prices continued to post strong increases, bolstering our sub-index to a 3% increase.

Two-Month Trial: Metal Buying Outlook

Yet, end user automotive sales are starting to show signs of plateauing after years of increases. Sales for the top three automakers selling in the U.S. increased, but slipped off their record pace in July as the strong growth rate that defined the past six years slowed to a crawl.

Automotive_Chart_Aug-2016_FNL

Declines at General Motors Co., Ford Motor Co. and Toyota Motor Corp. overshadowed increases by smaller rivals, including Nissan Motor Co. and Honda Motor Co. Sales were on pace to set another record this year but that’s in serious doubt after this report.

Analysts say sales incentives and fleet sales need to play a bigger role in the market to get back on that record pace. Overall sales increased modestly in July, rising 0.7% to 1.52 million, according to research firm Autodata Corp., translating to a seasonally adjusted annualized selling pace of 17.9 million.

While higher than the prior July, the adjusted sales pace has leveled off compared with the sizable year-over-year increases from 2015’s final six months, which drove the U.S. light-vehicle market last year to its first record in a decade and a half.

Compare Prices With The July 2016 MMI Report

Meanwhile, prices of automotive metals are still being buoyed by the bull run in precious metals. Catalysts are no exception and platinum and palladium prices posted strong increases while offsetting losses by other automotive metals, such as hot-dipped galvanized steel. With no sign of an increase in interest rates from the Federal Reserve anytime soon, expect the calalyst metals — and gold and silver — to continue increasing.

Sign up for MetalMiner membership for all automotive metal prices.

For full access to this MetalMiner membership content:
Log In |

The Commerce Department said construction spending declined 0.6% to its lowest level since June 2015 after dipping 0.1% in May. June marked the third straight month of declines in outlays.

Two-Month Trial: Metal Buying Outlook

Economists polled by Reuters had forecast construction spending increasing 0.5% in June after a previously reported 0.8% drop in May. Their June estimates were largely based on the government’s assumptions for private residential and nonresidential construction spending in the advance GDP report.

Construction_Chart_August_2016_FNL

Weak nonresidential spending and a pullback in home building were credited for the drop. Our Construction MMI still increased from 66 to 67 this month, largely based on jumps in still-in-demand steel products such as rebar and H-beams. Those prices made up for steep drops elsewhere to eke out the 1.5% increase.

However, weak U.S. economic growth seems to have finally hit the construction industry, previously a bright spot of the U.S. economy. A third straight month of declining construction spending will certainly be reflected soon in overall purchasing.

“It’s a deceleration process after two years of fairly decent growth,” Robert Murray, chief economist of Dodge Data & Analytics, told Reuters.

Compare Prices With The July 2016 MMI Report

The slowdown can be seen in construction payrolls. Adjusted for seasonal fluctuations, the number of people working in construction has dropped by 22,000 since hitting a post-recession peak in March of about 6.7 million.

Sign up for MetalMiner membership for all construction metal prices.

For full access to this MetalMiner membership content:
Log In |

Major toolmaker Kennametal, Inc. is cutting jobs and steel imports into the U.S. were up in July.

Kennametal Cuts Jobs

Industrial toolmaker Kennametal Inc., hard-hit by a deep slump in the coal and oil industries, plans to cut 1,000 jobs and increase cost-cutting “substantially” in North America, Europe, Middle East and Africa following its second-straight year of losses.

Two-Month Trial: Metal Buying Outlook

Kennametal makes cutting and drilling tools used in oil and gas exploration, coal mining, road construction and other industries. To offset the slump in the coil and oil industries, Kennametal has been slashing costs and shedding operations.

Steel Imports into the US Up in July

Based on the Commerce Department’s most recent Steel Import Monitoring and Analysis (SIMA) data, the American Iron and Steel Institute reported today that steel import permit applications for the month of July totaled 3,198,000 net tons.

Free Download: The July 2016 MMI Report

This was a 7% increase from the 2,978,000 permit tons recorded in June and a 22% increase from the June preliminary imports total of 2,630,000 nt. Import permit tonnage for finished steel in July was 2,439,000 nt, up 10% from the preliminary imports total of 2,218,000 nt in June. For the first seven months of 2016 (including July SIMA permits and June preliminary data), total and finished steel imports were 18,713,000 nt and 15,211,000 nt, down 25% and 26%, respectively, from the same period in 2015. The estimated finished steel import market share in July was 27% and is 25% year-to-date .

Rich Harshman, Chairman, President and Chief Executive Officer, of Allegheny Technologies, Inc. (ATI) emphasized in the company’s Q2 2016 earnings call last week that sales to the aerospace and defense market continue to drive ATI’s results, representing over 50% of total 2016 sales.

Two-Month Trial: Metal Buying Outlook

Harshman said, “Our aerospace market is being driven, in large part, by the growth of ATI’s next-generation mill products, forgings and castings.”

StuartsF35_500

Defense, in both the aerospace engine and airframe segments, are helping ATI’s bottom line. Source: Department of Defense.

ATI’s business strategy is heavily focused on products which are proprietary to ATI or have high barriers to entry.  Based on long-term agreements, its technological prowess and its ability to meet build rate schedules, ATI seems well-positioned to capitalize on the increased build rates in commercial aerospace.

ATI has a foothold in legacy programs for both airframes and jet engines but has also been part of the research and development for the next generation of both. ATI has been awarded 300 new parts contracts which will represent over $1 billion n new business from 2016-2020.  The long-term agreements (LTAs) will lead to significant growth in ATI’s components business in precision forgings and castings as well as in powder metal alloys, which are usually used for additive manufacturing or 3D printing. Read more

The steel industry is awaiting a decision this week by the U.S. International Trade Commission on whether U.S. Steel‘s 337 petition, an attempt to block all Chinese carbon and alloy steel from entering the U.S. market, should continue to be investigated or be suspended.

Free Download: The July 2016 MMI Report

Friday, Aug. 5 marks the 30-day statutory deadline for the ITC to rule on a suspension order, although the ITC can give itself an extension. The ITC could decide to uphold Administrative Law Judge Dee Lord’s temporary suspension order issued July 6, overturn her order or do nothing.

Lord temporarily suspended the investigation on the grounds that at least two issues raised in the case fall under the Commerce Department‘s purview, and that there was no record Commerce was notified of the ITC investigation.

Two-Month Trial: Metal Buying Outlook

U.S. Steel has requested  that the ITC issue a permanent limited exclusion order and cease-and-desist orders for Chinese steelmakers. It’s also seeking a general exclusion order from the ITC barring all unfairly traded Chinese steel products that are manufactured abroad, sold for importation, or sold in the U.S. after importation.

Brazil is considering its options to fight the recent heavy U.S. anti-dumping tariffs on it over cold-rolled steel imports. Hedge funds have turned bearish on oil, encompassing both crude and refined products.

Brazil Might Take Cold-Rolled Dumping Case to the WTO

Brazil will wait for the U.S. International Trade Commission to rule on a Department of Commerce anti-dumping determination on its cold-rolled steel before appealing to the World Trade Organization, a senior Brazilian official said on Monday.

Two-Month Trial: Metal Buying Outlook

The Commerce Department said last week that Brazilian cold-rolled steel was being subsidized by seven export promotion programs in Brazil and passed its anti-dumping determination to the ITC to rule whether there is injury to U.S. producers.

Hedge Funds Turn Bearish on Oil

Hedge funds have turned very bearish toward both crude oil and refined products over the last two months amid signs of an oversupply of gasoline.

Free Download: The July 2016 MMI Report

Hedge funds and other money managers added the equivalent of 56 million barrels of extra short positions in the three main Brent Crude and West Texas Intermediate futures and options contracts in the week ending July 26.

A major merger in green power and automobile manufacturing saw Elon Musk’s Tesla Motors buy his other green company, panel manufacturer SolarCity. Japanese steelmakers increased output for the first time since 2014.

Tesla to Buy SolarCity

Tesla Motors said it will buy solar panel installer SolarCity for $2.6 billion in shares to form a one-stop clean energy shop.

Two-Month Trial: Metal Buying Outlook

The deal is a major part of Tesla Chief Executive Elon Musk’s master plan “part deux” that calls for the company to offer consumers a single source of hardware to power a low-carbon lifestyle. Musk is also a major shareholder in SolarCity. The combined entity will offer consumers solar panels, home battery storage systems and electric cars under a single brand.

The actual purchase price in the all-stock deal is $25.83 a share for Tesla to buy SolarCity’s stock. SolarCity actually closed at $26/share on Friday.

Japan’s Top Steelmakers Boost Output

Japanese steelmakers boosted output over April to June, with top producer Nippon Steel & Sumitomo Metal posting its first such increase since 2014 on improved prices, but their annual profits are expected to be eroded as a firm yen hurts key customers.

Free Download: The July 2016 MMI Report

Higher Japanese output, at a time when the world’s biggest producer China is also churning out record volumes, could dent a recovery in Shanghai steel futures that have risen 40%t in 2016 after plunging 70% over the past six years on a global supply glut.

The Environmental Protection Agency‘s Clean Power Plan took another hit this week and ArcelorMittal, the world’s largest steel company, beat expectations with its Q2 filing.

Fifth Circuit Blocks Clean Power Plan ‘Haze Rule’

The Fifth U.S. Circuit Court of Appeals’ recent block of the Environmental Protection Agency‘s regional haze plan for Texas and Oklahoma supports arguments that the agency overstepped its legal authority in crafting the overall Clean Power Plan, states challenging the rule told the D.C. Circuit on Wednesday.

We have extensively covered the clean power plan and its implications for U.S. manufacturers.

ArcelorMittal Beats Q2 Forecasts

ArcelorMittal, the world’s largest producer of steel, on Friday reported a better-than-expected core profit for the second quarter but kept its outlook for the full year unchanged. Core profit almost doubled in the second quarter compared to the same period last year to $1.77 billion, well above the $1.574 billion expected in Reuters poll of eight analysts.

There’s a quiet battle being fought outside the limelight between India and other steel producing nations over the world’s largest democracy’s protectionist measure, the Minimum Import Price (MIP), introduced in February.

Two-Month Trial: Metal Buying Outlook

The MIP, essentially a tariff on imports targeted mainly at neighboring China, is set to expire August 5. While large steelmakers in India are pushing for the continuation of MIP by the government, some member-nations of the World Trade Organization have started to apply pressure to remove the MIP. The MIP on 173 steel items for six months was introduced as a way to curb cheap imports and firm up steel prices in the home market. The MIP ranged from $341 a metric ton to $752/mt depending on which product.

Other Nations Protest the MIP

In a recent meeting of the goods council at the WTO, nine members, including the U.S., the European Union and China, asked India to justify its continued restrictions on imported steel.

There are some who say that if India continues with the MIP after the deadline it could be dragged into dispute proceedings at the WTO by any of the complaining members, although India has consistently maintained it’s done no wrong and the MIP is a general agreement on tariffs and trade-compliant instrument to regulate imports. Almost all steel producing major countries have imposed one form or the other of tariffs or other protectionist measures to curb steel imports. There are also reports here that India could prune the list of 173 steel products and still keep the MIP in effect for most products.

MIP Effect: Imports Fall

In the first quarter of FY17 (India’s fiscal year begins in on April 1) total steel production in India grew by 3.8% year-on-year, while overall steel consumption grew by only 0.3%. In the same period, imports fell by 30.7% year-on-year, according to a new report by rating agency India Rating and Research (Ind-Ra).

According to the agency, the increase in Indian steel production was supported by the MIP policy but was unlikely to continue beyond August after it expires. Since the imposition of the MIP, domestic producers benefited by way of import substitution. Ind-Ra felt the continuation of the industry protection measure beyond August is required to “safeguard the interest of the domestic steel industry, which has shown signs of a recovery in the current fiscal on the back of MIP.”

Free Download: The July 2016 MMI Report

Ind-Ra opined that profitability for most steel producers is likely to remain under pressure due to the newly added capacity. The interest cost and depreciation from these new capacities has now started to impact the income statements and increased both operations and financial leverage for India’s steel industry. For India’s steel companies to see healthy profit generation, capacity utilization levels need to increase significantly.